Making Money with a Vacation Home

Vacations conjure up a variety of memories, most of them good. Lazy afternoons lounging by the shore. Delicious meals at exotic restaurants. Swaying the night away to an excellent tropical band. Great stuff, huh? And it usually costs a fortune. The dirty little secret is that more and more vacation home owners have learned how to turn that money pit into a cash flow miracle.

The great thing about vacation homes is, well, they’re vacation homes. The kind of crappy thing about vacation homes is they cost money to maintain. Sometimes a lot of money. The good news is that Jason Hartman’s strategy for income property investing teaches you how to earn money renting out your vacation home during those times of the year when it’s not in use, which, frankly, is quite a bit of the time.

Are you wondering if there’s really a demand for vacation rentals? The truth is, during peak seasons in popular vacation destinations (translation: anywhere near a beach in Florida), depending upon size and amenities, you might be able to rent your vacation home out for several thousand dollars a week. Do the math. At that rate, it won’t take long to make up some of that money you keep pouring into it. Before you know it, you’ll be a real live landlord on your way to the world of passive income and positive cash flow.

You’re not alone in your desire to help foot the bill for a vacation home by renting it. The National Association of Realtors reports that 92% of 2012 vacation home buyers planned to rent their property at some point in the first year of ownership. More than three-quarters (76%) said the potential for rental income influenced their buying decision. The reality is that becoming a landlord could turn out to be a wise financial decision. Just remember, as owner, you have the option of cherry-picking the best times of year, though you might prefer to reap the economic rewards of letting someone rent it from you during those premium months.

As suspected, in the wake of the foreclosure of 2007 and subsequent years, banks are no longer throwing almost free money at anyone who wants it. Lending standards have tightened up and we can expect they’ll be slightly tighter when the property is a second home and intended to be put into service as a rental. In that case, the down payment might be as high as 25%. New vacation home buyers have found that the interest rate can increase a quarter of a point for a second home and maybe an additional eighth of a point higher as a rental.

All in all, though, with the right debt-to-income ratio, and a good credit score, you could be on your way to a career as a landlord in paradise. (Top image: Flickr | PoshSurfside.com)